The intellectual dishonesty continues. As before, it’s the lie of omission.
R and R are familiar with my book ‘The 7 Deadly Innocent Frauds of Economic Policy’ and, when pressed, agree with the dynamics.

They know there is a more than material difference between floating and fixed exchange rate regimes that they continue to exclude from their analysis.

They know that one agents ‘deficit’ is another’s ‘surplus’ to the penny, a critical understanding they continue to exclude.

They know that ‘demand leakages’ mean some other agent must spend more than its income to sustain output and employment.

They know federal spending is via the Fed crediting a member bank reserve account, a process that is not operationally constrained by revenues. That is, there is no dollar solvency issue for the US government.

They know that ‘debt management’, operationally, is a matter of the Fed simply debiting and crediting securities accounts and reserve accounts, both at the Fed.

They know that if there is no problem of excess demand, there is no ‘deficit problem’ regardless of the magnitudes, short term or long term.

They know unemployment is the evidence deficit spending is too low and a tax cut and/or spending increase is in order, and that a fiscal adjustment will restore output and employment, regardless of the magnitude of deficits or debt.

Carmen’s husband Vince was the head of monetary affairs at the Fed for many years, serving both Alan Greenspan and Ben Bernanke. He knows implicitly how the accounts clear and how the accounting works, to the penny. He knows the currency itself is a case of monopoly. He knows the Fed, not ‘the market’ necessarily sets rates. He knows that, operationally, US Treasury securities function as interest rate, and not to fund expenditures. He knows it all!

Carmen, Vince, please come home! I hereby offer my personal amnesty- come clean NOW and all is forgiven! As you well know, coming clean NOW will profoundly change the world. As you well know, coming clean NOW will profoundly alter the course of our civilization!

Carmen, Vince, either you believe in an informed electorate or you don’t!?

87 Responses to Reply to Reinhart and Rogoff’s NYT Response to Critics

They know all these things and they ignored it? What does that say about these two? It makes them frauds IMO. And since the PTB will wave this in your face as “proof” that debt and deficits are bad, they are dangerous and may have helped cause misery all over the world through unneeded austerity and depression in places like Greece and Spain. Even here in the states there are tens of millions who are looking for work and Obama is looking for another grand bargain to burnish his legacy. This is ugly. These two are willfully and recklessly negligent. Isn’t that what they put you in jail for?

Rogoff and Reinhart plot GDP growth as a function of debt/GDP, which is visibly not an independent variable — if GDP grows by 3%, debt/GDP drops by 3% (other things being equal).

And, if other things aren’t equal, e.g., say debt and GDP both grow by 3%, then the debt/GDP remains constant, even though the Treasury has borrowed an additional half-a-trillion dollars (i.e., 3% of $16.67 trillion, which is roughly the current national debt).

So, when people debate which way the causality goes, keep in mind that the debt-to-GDP ratio is very obviously a function of GDP and varies inversely with the GDP.

You’re being logical. When you’re trying to fix the result you need to be sneaky. Besides they mixed free floating sovereign currencies with others per Wray and Mosler (above). That makes the whole thing nonsense or, I think, a deliberate fix, aka fraud.

PS Wray said something about going back 800 years. Ever hear anything so silly? The department of economics in say Scotland back then must have been a dozzie. Oh wait maybe that was Northumbria. Gotta get these places straight.

Reinhart and Rogoff surely knew the purposes for which their work was being cited. Per PRwatch.org:

It will come as no surprise that Reinhart and Rogoff have ties to Wall Street billionaire Pete Peterson, a big fan of their work. Peterson has been advocating cuts to Social Security and Medicare for decades in order to prevent a debt crisis he warns will spike interest rates and collapse the economy. (Peterson failed to warn of the actual crisis building on Wall Street during his time at the Blackstone Group.)

When Washington Post writer Suzy Khimm pointed out to Peterson that the U.S. built significant deficits during the financial crisis but maintained very low interest rates, Peterson responded that America still needed to be on high alert: “you know [Kenneth] Rogoff and [Carmen] Reinhart — I’ve talked to them, and they say [debt crises] are sudden, they’re sharp, they’re very substantial. The risk is simply too big. At some point, if we lurch from crisis to crisis, then confidence will decline on our economy in general.”

As the Center for Media and Democracy detailed in the online report, “The Peterson Pyramid,” the Blackstone billionaire turned philanthropist has spent half a billion dollars to promote this chorus of calamity. Through the Peter G. Peterson Foundation, Peterson has funded practically every think tank and non-profit that works on deficit- and debt-related issues, including his latest astroturf supergroup, “Fix the Debt,” which has set a July 4, 2013 deadline for securing an austerity budget.

Reinhart, described glowingly by the New York Times as “the most influential female economist in the world,” was a Senior Fellow at the Peterson Institute for International Economics founded, chaired, and funded by Peterson. Reinhart is listed as participating in many Peterson Institute events, such as their 2012 fiscal summit along with Paul Ryan, Alan Simpson, and Tim Geithner, and numerous other Peterson lectures and events available on YouTube. She is married to economist and author Vincent Reinhart, who does similar work for the American Enterprise Institute, also funded by the Peterson Foundation.

Kenneth Rogoff is listed on the Advisory Board of the Peterson Institute. The Peterson Institute bankrolled and published a 2011 Rogoff-Reinhart book-length collaboration, “A Decade of Debt,” where the authors apparently used the same flawed data to reach many of the same conclusions and warn ominously of a “debt burden” stretching into 2017 that “will weigh heavily on the public policy agenda of numerous advanced economies and global financial markets for some time to come.” (Note that not everyone associated with the Institute touts the Peterson party line.)

Thanks. I’m gonna go with fraud. what they did was fraudulent. They should be in jail for the misery they have caused. Obama also buys into the deficit hysteria and is still negotiating with hisself over a grand bargain. Me now thinks he will complete the negotiation about the time Petersen needs it: July 4, 2013.

Rogoff is a real asshole. Here is an open letter he wrote to Joe Stiglitz, when the two of them were chief economists, respectively, at the World Bank (Stiglitz) and the International Monetary Fund (Rogoff).

In “This Time Is Different,” our 2009 history of financial crises over eight centuries, we found that when sovereign debt reached unsustainable levels, so did the cost of borrowing, if it was even possible at all.

Eight Centuries? WTF? Where did that data come from?
1. I Doubt the accuracy of data over 150 years old.
2. There was a Gold Standard then.
3. There were no Government bonds, not any Central banks.
4. Even the UK did not have a “Central Bank” as we know it today.

So Eight Centuries is not relevant.

Next, and wow:

Resolving these debt burdens usually involves a transfer, often painful, from savers to borrowers.

Not a mention of taxing to resolve these debts. No mention that Sovereign Bonds are just interest bearing savings accounts, and can be converted to non interest bearing at the Sovereign’s will.

The Savers Depositors? Wealthy? must pay the Creditors? Why? Just retire the interest.

These people are smart? Really? Ok, R&R can we have a face-to-face televised discussion? When are where?

Good point, wigwam. But it also needs to be kept in mind that to test a good causal explanation inside a complex system with multiple feedback loops you need to include variables measuring all relevant factors from competing economic theories in the literature. If you fail to do that you’re not fairly comparing the explanations and therefore are biasing you results. The RR study really considered only the very primitive theory that debt past a certain level causes lower growth. They didn’t even fairly compare that to the obverse that growth past a certain level causes lower debt, much less to more realistic theories that would have included othr variables and time series as well.

There is a small chance, I agree, that he will be unable to complete the negotiations with himself given the fall out from this. But I put nothing past Obamas drive to burnish his legacy by cutting the deficit.

At the NEP site, a commenter raised the issue of why MMT economists hadn’t replicated the study since it seemed so easy to do. I replied there in this way.

John, I suspect that the type of study you’re proposing is in the works now that the data’s been released. Remember, that UMKC people did try to acquire the RR data to replicate their work back in 2010, but RR refused to distribute their spreadsheet and have continued to refuse to disclose it until a few weeks ago. Of course, an attempt could have been made to gather the data again, but then the situation would have been a he said, she said deal with the name of Harvard and the money of the austerians in back of R and R, so that kind of refutation would have received little attention.

MMT economists were very active in criticizing the RR study in 2010 and since on design and theoretical grounds. Those criticisms were decisive. The simple point that RR didn’t distinguish between fiat sovereign nations and, more generally among nations based on their type of currency system was enough to convince me that the study was BS. When people continued to take it seriously after critiques from Randy and Yeva Nersisyan and also Bill Mitchell appeared told me in 2010, that the mainstream didn’t care about the validity and would not listen to obvious critiques.

It was also plain to me that the study was junk economic science because it included so few variables. That is, if you’re basically producing two variable correlations over all nations you can’t be interested in really explaining economic growth while highlighting the role of debt levels in that process. The reason why is that you’re not including the variety of variables and measures you need to partial out spurious correlations. For example, if you’re looking at economic growth as the dependent variable, then many other factors can impact that such as levels of unemployment, educational quality, levels of private investment, the proportion of an economy occupied by the FIRE sector, attributes of the health care system, price stability, crime rates, cultural factors, etc. You also need to investigate reverse causation and mutual causation, and of course do that across differing currency regimes.

I can go on and on, but my point here is that, based on its design, and failure to include data that would test alternative theories and explanations of gowth, it was evident to me, and should have been evident to the econometricians working for the world’s major institutions that the R-R reported results, even without calculation errors, or leaving out relevant data points, could not say possibly say anything about causal relations that would be useful in arriving at policy recommendations. It was empty of policy relevance unless people wanted to believe in austerity. It was, in other words, a pure “junk science” fig leaf for the oligarchs to prosecute their war against everyone else.

The press and MSM media played along with the fig leaf because they are owned and dominated by the oligarchs, not because there was ever anything worthwhile about the RR work, the level of which is so amateurish as an example of econometrics work that it would boggle the mind of an observer if that observer didn’t know that the academic system at the big schools had been corrupted by the grants/think tank system funded by the oligarchs.

I think, finally, that the RR study is an example of the corruption of social science in modern times. I believe that one can show that the study was not just guilty of calculation errors and errors of omission, but that these must be seen as part of a pattern of systematic bias that permeated their whole process of inquiry beginning with their selection of the problem, moving through every decision point in implementing the study, and ending with their evaluation of their evidence and their writing of the result. They made no attempt to do a scientific study maximizing fair comparison of alternative theories having policy relevance, but instead prepared what was essentially a legal brief supporting austerity policies and the Pete Peterson line. The social costs of what they did are strewn all over the globe. See this recent post at DailyKos.

I don’t know much about economics but if someone else made a mistake like this would they not admit it if they were honest when presented the facts?
If they won’t admit they are wrong soon people will be forced to conclude they are dishonest.

I think, finally, that the RR study is an example of the corruption of social science in modern times. I believe that one can show that the study was not just guilty of calculation errors and errors of omission, but that these must be seen as part of a pattern of systematic bias that permeated their whole process of inquiry beginning with their selection of the problem, moving through every decision point in implementing the study, and ending with their evaluation of their evidence and their writing of the result. They made no attempt to do a scientific study maximizing fair comparison of alternative theories having policy relevance, but instead prepared what was essentially a legal brief supporting austerity policies and the Pete Peterson line. [Emphasis added.]

In short, Kenneth Rogoff and Carmine Reinhart were and still are paid propagandists for Pete Peterson. His money is talking through them and thereby further tarnishing the reputation of Harvard’s Economics Department. Harvard’s conflict-of-interest committee should look into this matter.

Given their response, the appropriate action is to allow them to experience prolonged unemployment. What they did is professional malpractice on a global scale that is hurting millions of people. Their continuance in their careers is just another sign that the system is rigged against competence.

These two aimed to please those who in some way compenstated and may/will continue to still compensate these two to put this junk out and up.

Consequences in doing so?… tick tock tick tock …yawn.

It is plain to see post 2007-2008 the PP types and the global political/social policy Cut and Gut cabal(s) and the outlaw POTUS ObamaBush and his deception based Obama WH need and want what these hacks did/do/keep doing.

High end USian academia seems unable post WW2 to maintain needed balance as to what it’s mission was/is and needed to be post WW2 and should be/needs to now be going into 21st C.

Consequences with this being so becoming impossible to deny as seen in this example.

Whatever the flaws of Reinhart and Rogoff in their research, they should be credited in a spirit of truth and reconciliation with coming up with a wonderful idea, however misapplied. That idea is precisely to go back 800 years to the 13th century, one of the most relevant eras of world history, and study the political economies and crises of that era with a view to envisioning alternative histories where communitarian socialism could have emerged directly from feudalism, and then seeking to realize those scenarios, or important elements of them, in the different and yet similar crises of the early 21st century.

Indeed this approach is “silly” in the best Old English or Middle English sense of “innocent, simple, happy, blessed.” To borrow Barbara Tuchman’s phrase originally applied to the 14th century, which shouldn’t be excluded from these studies either, looking back seven or eight centuries could provide “a distant mirror” helping us to look beyond fine-tuning an unjust system and toward addressing the burning issues of social justice confronting the world then and now.

This is the kind of analysis which, to a degree, Peter Kropotkin attempted in his study on Mutual Aid, with much on the medieval era. As a medievalist and charter member of the Axis of Archaism, I suggest that we should boldly embrace Reinhart and Rogoff’s time depth while going to the roots of injustice in a truly radical form of alternative economic history.

For example, how about “The Albigensian Crusade (1208-1242): Genocide in Languedoc and the Military-Agricultural Complex”; or “St. Thomas Aquinas and the Just Price: An Ethic for a New Era of Ecological Limits”; or “The Great Colloquys in Place of the Crusades: Envisioning Medieval Near Eastern-European Dialogue and its Communitarian Possibilities.”

The 13th and 14th centuries, as historians like Guy Geltner have shown, was also a germinal era for the rise of urban prisons in Europe such as Le Stinche in Florence, a topic of great interest given the importance of the Prison-Industrial Complex in the U.S.A. now. The ways in which imprisonment for debt could actually trap prisoners into a cycle of insolvency and captivity might be a forceful metaphor for Obamanomics as well as an invitation to find better models both of criminal justice and of sound resource economics.

If Reinhart and Rogoff have unwittingly unleashed some “silliness” in the best medieval English sense, that could serve at once to mitigate and to help overcome the shortcomings of their approach to 800 years of history.

Lets assume for the moment you found some information on Northumbia’s debts and deficits just post the Viking era. So now we have the rock solid data. What relevance in the world does that have to the U.S. today? Do you understand what Warren meant in the above post? This is at best intellectual dishonesty and given that these people are paid by Peterson it is a conflict of interest. “Silliness” to me is being kind. We are talking here about economics and the impact debts have on GDP growth today. The point to be made is the US is a sovereign issuer of the currency and can never be forced into insolvency. I am not at all sure if Northbumbia can say that, and RR gave scant details to their allegations. But whether it can or not, it has nothing at all to do with our situation. None.

We need to compare austerity and the Obama/helicopter Ben recovery/s with FDR’s recovery and see how we compare.
Austerity is one idea and we now have years of real world data to compare it with and we have FDR’s recovery to compare it with the big question is how do they match up.
That and how long we can afford to keep ignoring it.
I find it curious that the stock market is at new highs but unemployment is still a problem.
Where is the money coming from has consumer spending increased? Has costs for goods gone down? Are consumers borrowing more money?
Or is the stockmarket moving up despite the economy because we are in another bubble?

Looking through the comments to the latest R&R article, I noticed that the comments criticizing R&R were “recommended” (thumbs up) by other readers in a ratio of between 15-1 and 20-1 over the comments coming to the authors’ defense. This really says something. The New York Times readership is, for the most part, fairly liberal but in a very mainstream way–by no means as critical or insightful about current events as is the FDL readership.

” A lie can spread around the world before the truth can get its’ pants on. ” M. Twain Seems this is more proof, if more is needed, that Pete’s Peckerhead Army of Pricks have a planned result in mind and found someone with the academic cred to carry out the dirty deed. Lots of well paid political reinforcements, as usual, too. ( Here’s where Pres. Obama gets a complete fail in the 2009 crisis. But, he should of got an Oscar, in his role as a change agent. ). Let’s send R&R to Athens or Madrid and drop them off in the middle of the city square. Let them tell those people about their omissions and errors. It’s time to start reprinting the Tees that say, ” End Poverty: Eat the Rich. ” I think the world has a large appetite for this menu right now. Bon Appetit!

imho, gold has no real value, I don’t see why it’s considered the “gold standard” for monetary stability

in an economic collapse, I see real wealth as someone who can control labor forces, they might do that with food, with security, with water, if there is no economy I ain’t got no use for gold, I need a roof over my families head, I need to feed them I need to hydrate them.

Both the deficit hawks and the MMT advocates say that increasing taxes would further hurt the economy now. I call BS on that — I say we need “clawback” heavy taxation on the rich who have benefited mightily from the systematic extortion over the last 40 years. Robert Reich’s call for much higher taxes on the rich has been criticized by none other than William K. Black (MMT) for being counterproductive, but I say Reich is correct and the Electronic Transaction Tax bill in Congress is a good start. Whenever economists or pundits oversimplify the discussion of taxes and spending (as the Republicans always do in their accusation of “tax and spend Democrats”) you know they are either being disingenuous or they are adhering to conventional economic theory that is not working. It is only a question of taxing ‘whom’ and spending on ‘what’.

A colleague of mine at Yale told me about a decade or so ago that when Rogoff was still there he was making $10,000 a day consulting for a bank. I asked him what the hell Rogoff was doing to merit that kind of pay, and he said it was just window dressing by the banks for rich clients. I doubt tnat Rogoff ever sold out. He probably sold out at birth.

Hi Margo, I love studying history and doing that with data-based analyses. Going back 800 years and even further would certainly produce very interesting work. But I agree with bluedot that the relevance of much of the data on debt and “GDP” for modern states and economies and their operations is likely to be either very limited or completely irrelevant. I think your interest in the idea stems from your interest in different questions and foci than RRs. That’s fine, but it doesn’t compensate from the irresponsibility and questionable ethical aspects of the RR study.

Probably true. But as it is, RR provided the tool. It helps the anti-austerity, pro- full employment forces to show that the tool can’t be used to support austerity policies. It’s particularly important right now, when we see that austerity is failing all over the world.

RE: They know federal spending is via the Fed crediting a member bank reserve account, a process that is not operationally constrained by revenues.

This is wrong. I don’t even know what “crediting a member bank reserve account” means but set that aside for now.

Federal spending is by check drawn upon a Treasury account at the Fed, being the Fed is the governments bank. The account has a balance. The deposits from tax revenues and other revenues and importantly in this case on the proceeds from the sale of Treasury bills, notes and bonds.

Late last week for instance the Treasuries checking account balance was $169 billion which was more than double that of the same time last year as tax receipts had grown 11% year over year. Because of that the Treasury will sell $9 billion less in bills and notes than it had planned to as recently as a few months ago.

Federal spending is absolutely and totally constrained by revenues because that is how the system was designed in theory and how the mechanisms of the system were developed and continue to function.

The Fed credits ‘member’, ie Primary Dealer, accounts when those dealers sell Treasury paper and MBS to the Fed in the Feds Open Market Operations, ie QE. However that has nothing directly to do with government spending, ie. the Treasury writing a check. The Treasury already wrote the check from the proceeds of the Treasury note that the Fed is now buying in this example. This makes it easier for the Treasury to sell more new paper, at low rates, but has nothing to directly to do with funding the Treasuries ‘checking’ account.

Of course, the claim that was made was that the facts did support austerity policies. Of course, they never did, but to show that you couldn’t use a one-liner. Now, you get to use on. “That’s crap — spreadsheet errors.”

I want to be kind but the Progressive cause is badly damaged by the sort of crackpot monetary theories espoused in this case and more and more often in these types of forums.

Liberals and Progressives for decades ignored monetary and financial issues and wore their ignorance of the topics as a badge of honor. Thus leaving the field open to the high priests of money and finance to capture the system for their own advantage.

The way to change what’s happening is not to have an intellectual thumb wrestling contest with some midget minds.

They key is to have a program to support, like 1% Wall St sales tax, FRB issue 0% 100 year bonds to fund large govt infrastructure projects, like coast-to-coast high speed freight rail, etc.

Nurses are doing a version of that, too little too late, call the tax Robin Hood, a big mistake leaving them open to mockery bc Robin Hood was a highway robber, but it’s a start. The nurses had a post on FDL a couple of days ago.

Good questions. Generally, the FDR recovery was far more impressive. First, it started from a much deeper depression and collapse of GDP. Second, GDP increases from the low point were very spectacular through much of the 1930s. Third, unemployment, measured the old way (more like U-6 today) peaked at roughly 26% if I recall correctly and then FDR drove it down to about 12-13% a little below where it is now. FDR, the, briefly listened to the austerians of his day, cut back on deficits in 1937 and immediately had a recession within the depression in 1938, which, again if I recall, drove the unemployment rate back up to 18% in 1938. In 1939 – 1941 FDR restored expansive spending and unemployment went down again gradually; but what finally killed the depression, of course, was the deficit spending during WW II, which was monumental in scope and created virtual full employment, while containing inflation with wage and price controls.

It’s also important to mention that FDR’s deficits and the recovery was fueled by spending on public works which have produced lasting economic and social value down to the present day. He did not stimulate with tax cuts or just advance consumption. His recovery produced lasting value to fuel the foundations of his economy.

MMTers all agree that increased taxation of the rich will have a negative economic impact on GDP at present. But the multiplier is only $.30 on the dollar. So, I don’t know any MMTers who would oppose that kind of tax if they knew that the dollars destroyed by taxing the rich were immediately replaced with new dollars spent on infrastructure reinvention which had a primary multiplier of 1.6. That would be a net gain we’d all welcome.

I think what we’re all saying is that it’s not about balancing the budget, that we need deficits, and that what we should be doing to end the recession, create full employment, and reduce inequality is direct Federal job creation in a job guarantee program.

No rapier, you’re the one who’s wrong. First, how can you say Warren is wrong when you don’t even know what crediting a reserve account means. Second, Warren has studied the banking system very carefully and he knows exactly how it operates. I recommend you buy his Soft Currency Economics II and note especially the Chapters on Mechanics of Federal Spending and Federal Government Spending, Borrowing, and Debt. Third, the Government doesn’t mostly write checks these days it far more frequently uses electronic transfers when it spends. In that process, the Government doesn’t make direct payments. It pays by instructing the Fed to credit private sector accounts.

As for Federal spending being constrained tax by revenue, that is not a necessity. It is an artifact of constraints that Congress has placed on the Treasury and the Fed and their relationship. Congress can repeal those at any moment But even if it doesn’t these current constraints don’t limit Federal spending to revenues from taxing and borrowing, because the Treasury can use platinum coin seigniorage if it wishes to do that(see here).

So, the real limitation on Federal spending isn’t currently in Congressional constraints on issuing money. It’s in Congressional appropriations (as provided for in the Constitution). That is, the Treasury cannot spend what Congress hasn’t appropriated.

That’s just labeling. Progressives have to get the operational details of the money and banking and its relationship to Government spending right. You’ve gotten it wrong. See this also for clarification.

‘Writing a check’ is still often literal, as an SS check, but obviously wire transfer is common. Still, the money transferred is out of the Treasuries account and that account is more real than your checking account for your bank account balance is not held in reserve. It isn’t there. It’s a figment of confidence and imagination. In the Treasuries case it is a dollar for dollar in proposition.

As for another system, well it’s another system. The trillion dollar coin is another system. In all cases changing the system is the job of politics to craft laws and regulations or to have the Imperial President just say so. (When the time comes for a monetary reset it will probably be by such order. Was Nixon’s going off the gold system really constitutional? (I’m no gold bug)) Until that time no person in a leadership position of either party nor any appointee has the slightest interest in any fundamental change. If someone does have such interest they don’t rise to positions of power.

No monetary system is perfect. No system is perfect. All systems can and will be taken over and corrupted. The robber barons were the hardest of hard money supporters. Now the giant banks and financial players are the supporters of the most ephemeral money imaginable. It’s the hard dirty job of politics to wrest the system from their control. The party who nominally should have taken up this fight 20 years ago instead delivered the system into the hands of those who ‘own the place’ now and his successor is 110% on board as well. We can talk theory until the cows come home but it’s all we’ve got. There is zero power behind change. Unless it’s a change those in power want. Then it will be done by fiat.

I haven’t got a check from the Federal government in years. Military pay became direct deposit. VA pay also direct deposit. Clothing allowance given annually direct deposit. Tax refunds direct deposit……….all of this stuff is creditted electronically to save money on cutting checks. And yet you have someone insisting that the Fed would cut a check to a bank that they routinely deal with(because apparently the cost of cutting checks for the Fed is inconsequencial.) It defies logic.

I think that the relationship between the Fed and the Treasury needs to be explained better and brought into the sunlight.

I almost think of the Fed as the beginning of public private partnership gone south due to lack of transparency and regulatory structure.

I daresay most Americans know that the Fed and it banking interests own almost the same amount of debt as the Social Security Trust Fund (and I don’t hear the idea floating around that IT should take a haircut on behalf of rich American taxpayers to get the deficit under control.)

In fact, during the 2011 debt-limit crisis, Ron Paul suggested that the Treasury should repudiate its debt to the Fed, and Dean Baker seconded that suggestion. But, I doubt that doing so would be legal.

In any case, I had already suggested that the Treasury mint a platinum coin to buy up the Fed’s Treasury bonds — there’s no way that could be “inflationary,” since the Fed had already monitized that debt.

Thank you for your correct understanding that actually what I describe has little relationship to R&R beyond the phrase “800 years ago”! My apologies to you and all for not making that clearer. I’d say that they’re trying to restore “stability” by spurious means, while I’m envisioning some kind of 21st-century nonviolent peasant uprising, so to speak.

Thank you for educating me to the Strozzi family, who seem very important in the quattrocento (1400′s). It’s curious that the name made me think of the famous modern composer Barbara Strozzi in the 17th century (quite avant garde for me).

We much agree that this kind of social and economic history can be very valuable. A grimly humorous footnote would be that the condottieri of the quattrocento in Italy were often expert in staging military conflicts in which very few people were killed, as opposed to the bombings of civilians by the U.S.A., most recently under Bush and now Obama.

Well, as I said. Most Treasury spending isn’t by check anymore, and to claim that it is isn’t a realistic description of the present system, Moreover even when checks are written, what happens then is that when then those checks are deposited or cashed by the recipient the bank’s reserves are debited and then the bank turns around and gets its reserves credited by the Fed which, in turn debits the Treasury’s account. So, the result is that the Treasury is crediting the Fed and causing the Fed to credit reserves down the line. Functionally, whether a check is involved or whether its done electronically, the result is the same.

Also this:

“As for another system, well it’s another system. The trillion dollar coin is another system.”

is simply mistaken. As I make clear in my book and in many previous posts here, the Executive’s authority to mint platinum coins and force the Fed to credit them is written into law, and has been wince 1996. It is part of the present system. It may be that the President is not prepared to use this power of his. But that doesn’t put it outside the system it just makes the President incompetent, stupid, timid, or evil. You can take your choice of the appropriate adjective to use.

I don’t either. But the point is that the deficit isn’t out of control. The deficit/debt is a political/messaging, not a financial or economic problem. It’s a chimera. the best thing is to deny that it is a problem at all, and then when others won’t agree, just ask them why they don’t just use High Value Platinum Coin Seigniorage (HVPCS) to create the revenue in the Treasury General Account (TGA)to pay it off as it falls due.

And I proposed the The Treasury mint platinum coins with face values high enough to pay off all the debt as it falls due. I’ve also analyzed whether that could possibly be inflationary and concluded that it would not be. Again, see my book.

Thanks, Margo. I wouldn’t mind that non-violent “peasant” uprising myself. Up with the 99%! Down with the 1%! And up with “Everybody In, Nobody out,” enhanced Medicare for All (HR 676); and down with that Obamian travesty PPACA!

Wig, I don’t care what they believe. I only care about what is true. I’m not going to advocate the wrong policy because they might think think the right one is inflationary. Instead, I’m going to do the best I can to educate them. I think all of us should do the same. Consider, we still have an additional piece of education to do. That piece is about net financial assets (NFAs). For inflation, it’s not the money supply that counts. It’s the supply of NFAs, especially the ones being used in economic activity. People will never understand that if we concede to their belief that it’s the money supply that counts.

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